When it comes to saving for the future or ensuring a retirement with maximum tax advantages, the globalized financial climate offers more options to the shrewd investor than ever before. Most people pay into an IRA for a 401k which is a very sensible (indeed essential) safeguard for your future finances. Some, however, prefer to hedge their bets with some personal investment to supplement their existing retirement plan. An increasing number of people are also combining the two by using their IRA to facilitate an investment in Bitcoin. Here we’re going to look at the nature of Bitcoin, how and why people use it as an asset for retirement and whether it’s a prudent investment for you.
Bitcoin Currency Decentralized Coin Money Virtual Image by MaxPixel
What is Bitcoin?
Bitcoin is a completely digital currency that has no physical presence in the ‘real’ world. No notes are printed, no coins are minted. Bitcoin is referred to as cryptocurrency. Unlike a dollar, a Euro or a Renminbi, it has no intrinsic value in and of itself, its value is determined by the people (and increasingly businesses) that use it.
Why are people investing in Bitcoin?
You can check out bitcoinIRA.com for more detailed information but essentially, Bitcoin is appealing for many investors due to its current high yield as well as its imperviousness to the fluctuations that affect centralized currency. In a turbulent global economic climate it appeals to many investors as it is a completely decentralized currency. No bank or government controls it so it is impervious to economic recession and depression. The value of conventional currency has (until very recently) been determined by the value of precious metals, whereas Bitcoin’s value is determined by mathematical algorithms. It’s current value is at an all time high and it is can be traded anonymously. As it is not a recognized currency it is technically property, making it a tax grey area that many are taking advantage of before it is subjected to any prohibitive legislature. As a digital currency it can be moved around the world without fluctuations in value or excessive bank charges.
Is Bitcoin a bubble?
Many frugal investors are gunshy when it comes to Bitcoin due to its unconventional nature and the possibility of a ‘Bitcoin bubble’ that could burst at any moment. Many bankers are claiming that the rising value of Bitcoin is indeed a bubble… But then they would, since it poses such a threat to their livelihood. Many people argue that given the still very recent financial crash of 2007-2008, bankers are the least qualified people to predict a bursting bubble. Advocates for Bitcoin argue that it represents the future of digital currency, a future that is not subject to the whims and recklessness of banks that have proven time after time that they can’t be trusted.
Is it right for me?
Like any investment, Bitcoin is neither inherently good nor inherently bad. The recent dramatic rise in its value may be encouraging but as such a new and untested commodity, Bitcoin remains a wildcard in the current financial marketplace. A smart strategy is to invest speculatively in addition to your existing portfolio rather than betting the farm in the hopes of a quick, high yield sell.